Airbnb draws scrutiny, regulations as guest stays surge in Tennessee

Knoxville Airbnb host Mike Cohen talks about his experience with the short term rental service in his home Saturday, Jan. 6, 2018.

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Knoxville resident Mike Cohen rents out his West Knoxville residence via Airbnb. Cohen has opened his home to guests through the service for the past three years.(Photo: Caitie McMekin / News Sentinel)Buy Photo

Even as Tennessee’s hotel industry continues to grow, short-term rentals such as Airbnb are growing, too — perhaps proportionately faster than hotels, considering their late start.

That hasn’t resulted in full-scale pushback from traditional lodging, but the growing presence of short-term rentals in urban neighborhoods has led to some local regulation and talk of more.

There are several short-term room rental online services, such as VRBO and HomeAway, but Airbnb is the largest. Airbnb announced nearly all of the cities it serves in East Tennessee saw their use double in 2017, hosting 154,000 visitors in the “Greater Knoxville” area, which Airbnb describes as Knox, Sevier, Blount, Cocke, Jefferson, Monroe and Cumberland counties.

Those rentals brought $17.4 million to area property owners, according to Airbnb. In Knoxville, 400 hosts welcomed 36,000 visitors, who paid $3.2 million for their stays.

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Knoxville resident Mike Cohen rents out his West Knoxville residence via Airbnb. Cohen has opened his home to guests through the service for the past three years.(Photo: Caitie McMekin / News Sentinel)

Sevier County big for Airbnb

But far and away the biggest draw was Sevier County. Cities there have a total of 790 Airbnb hosts, who saw 106,000 guests and made $12.9 million, according to the company. Knoxville, Gatlinburg, Pigeon Forge and Sevierville are all among the top 10 home-sharing markets in Tennessee, Airbnb reported.

“A lot of those mountain towns truly represent a dream vacation for some families,” said Ben Breit, Airbnb’s Tennessee spokesman, via email. “And you have a lot of cabins on our platform that have served as traditional vacation rentals for many years, and now they're just using Airbnb as another forum to reach customers.”

Longtime cabin renters appreciate the background checks Airbnb does on its clients, he said.

Sevier County gets more visitors than Knoxville, and probably has more “condos, cabins, and chalets” available, too, said Leon Downey, executive director of the Pigeon Forge Department of Tourism.

Brad Ivens, president of Smoky Mountain Vacation Lodging Association, heads a property management company for individual cabin and chalet owners. They look at Airbnb and similar services as “online travel agents” like Expedia.com, with which traditional cabin rental agencies are already familiar, he said.

“For us, it’s not a new animal,” Ivens said. Short-term rental services have definitely had an impact, but vacation lodging services can themselves list properties on Airbnb, he said.

Traditional property managers and rental agents follow myriad local and state regulations on taxation, safety and licensing, and they want to see Airbnb do the same, Ivens said.

Right now that burden — of tax collection, at least — is usually on the individual property owners.

“Operators of short-term rentals are required to obtain a Sevier County business license and collect and remit lodging, sales and gross receipts taxes,” Sevier County spokesman Perrin Anderson said. “Short-term rentals are fundamentally no different than regular lodging properties, so it is fair that those who make a profit from online or advertised short-term rentals by owner should pay all applicable local and state taxes.”

Taxing taxation

Mike Cohen, owner of Knoxville’s Cohen Communications, also rents out part of his home on Pemmbrooke Shire Lane. He’s done so for three years, exclusively through Airbnb. In that time he has seen a steady stream of visitors from all over the country, plus England, Bulgaria, Syria, Canada and France.

“Many choose Airbnb because they want the space, because they have a pet (I am pet-friendly), they want a kitchen, they want more privacy,” Cohen said in an email.

Like hosts in Sevier County and elsewhere in Tennessee, he manages local compliance himself, including applicable taxes.

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Knoxville resident Mike Cohen rents out his West Knoxville residence via Airbnb. Cohen has opened his home to guests through the service for the past three years.(Photo: Caitie McMekin / News Sentinel)

“We all want Airbnb to handle this for us,” Cohen said. The company has indicated that it will, he said. Nothing has materialized yet, but Cohen is confident the tax issue will be resolved.

He is happy to see recent legislation on the subject, and has always thought Airbnb users should be paying the local occupancy tax. Most of that revenue goes to Visit Knoxville, which promotes events such as the Big Ears and Rhythm & Blooms music festivals, and those in turn draw guests to Cohen’s rooms, he said.

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The Knoxville City Council gave first approval to an ordinance regulating short-term rentals like Airbnb on Tuesday, Nov. 7, 2017.
Rachel Ohm/ News Sentinel.

Knoxville is working with Airbnb to set up a voluntary tax collection agreement, said Jesse Mayshark, the city’s director of communications.

“We hope to get that in place soon, although until it is in place it will be up to the individual hosts to do the collection,” he said. “But we know it will be a lot easier for everybody to have that agreement, so we want to get it done as soon as possible.”

Airbnb already has such a tax-collection-and-submission agreement with Memphis, and hopes to strike similar ones with Knoxville and other Tennessee cities, Breit said.

Founded in 2008

Founded in 2008, Airbnb lists rentals in more than 65,000 cities worldwide, according to the company. Nashville is tops in Tennessee, but 2017 numbers for that market aren’t yet available, Breit said.

Memphis saw 68,000 Airbnb guests, who paid $7 million in 2017, while Chattanooga got 53,000 visitors, earning hosts $5.2 million, according to the company. Suburbs of major cities saw big numbers, too, such as 6,000 visitors to Murfreesboro and 4,400 to Lookout Mountain.

Local governments began regulating Airbnb when they realized they didn’t have a good way to track the location of short-term rentals, and police often didn’t know if they were private homes or commercial property, said Greg Adkins, president and CEO of the Tennessee Hospitality & Tourism Association.

The traditional lodging industry maintains that short-term rentals perform the same commercial transactions as hotels or bed-and-breakfasts, which pay several levels of taxes, obey zoning laws, must have insurance, and meet multiple safety and accessibility regulations, he said.

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Knoxville resident Mike Cohen rents out his West Knoxville residence via Airbnb. Cohen has opened his home to guests through the service for the past three years. In that time he has seen a steady stream of visitors from all over the country, plus England, Bulgaria, Syria, Canada and France.(Photo: Caitie McMekin / News Sentinel)

“We as an industry think that like-minded businesses should be put on the same level playing field,” Adkins said. Airbnb itself can certainly afford to meet those obligations, he said.

“It is big corporate America. It is not mom and pop,” Adkins said. “They’re larger than Marriott.”

Ruling in, ruling out

Airbnb maintains that it complements the hotel industry, offering overflow space for big events such as University of Tennessee football games when Knoxville hotels are booked. The company points to the continued growth in hotels statewide as evidence that traditional lodgers aren’t hurting.

As calls for regulation grew, Airbnb and similar companies lobbied the Tennessee General Assembly to prevent cities from banning short-term rentals. A bill targeting only Nashville narrowly passed the House, but stalled in a Senate committee. It may come back up this year, leading cities to pass regulations pre-emptively.

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Knoxville resident Mike Cohen rents out his West Knoxville residence via Airbnb. Cohen has opened his home to guests through the service for the past three years.(Photo: Caitie McMekin / News Sentinel)

Most communities allow short-term rentals with a special permit, and it should be a local government matter, Adkins said. But Airbnb wants the state to pre-emptively declare them legal in any location, he said.

In general, short-term rental regulations recognize three types:

Owner-occupied houses in residential neighborhoods, rented as a whole or in part;

Rentals, owner-occupied or not, in mixed-use areas or commercial areas that allow some residential use; and

Nashville began regulating short-term rentals in 2015, allowing them with a permit and collection of local taxes, but that ordinance has been criticized as inadequate and hard to enforce. So on Jan. 16, Nashville Metro Council is expected to choose between three new ordinances on short-term rental.

One is a committee-created compromise that would cap, but not prohibit, rental of houses that aren’t owner-occupied. Another, opposed by Airbnb and other rental companies, would phase out investor-owned short-term rentals in residential areas over three years.

The third would grandfather in existing non-owner-occupied rentals but prevent new ones in residential neighborhoods.

In mid-2017 Memphis applied its noise control, garbage, anti-discrimination and fire codes to short-term rentals, in conjunction with specific taxes and an agreement allowing firms such as Airbnb to submit taxes to the city on behalf of its hosts.

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Knoxville resident Mike Cohen rents out his West Knoxville residence via Airbnb. Cohen has opened his home to guests through the service for the past three years.(Photo: Caitie McMekin / News Sentinel)

Also in 2017 Chattanooga created a special short-term rental district, which went into effect Oct. 1. It removed the requirement for such rentals to be zoned like apartments. The zone includes the central city and much of North Shore. Property owners have to buy short-term rental permits, and non-resident owners have to also pass a city council hearing if neighbors are opposed.

Knoxville's short-term rental ordinance

Last among Tennessee’s major cities, Knoxville approved a short-term rental ordinance in November, which took effect Jan. 2. Under it, short-term rental hosts must get a permit, meet minimum safety requirements and collect hotel and occupancy taxes.

Owner-occupants in Knoxville neighborhoods and owners of property in generally non-residential areas that still allow some residential use can apply for one-year renewable permits. Absentee owners of short-term rentals in residential neighborhoods can get only a one-year non-renewable permit, which must be submitted by Feb. 1, and then only if they can show the home was already being used as a short-term rental before March 1, 2017. Permit applications are available at knoxvilletn.gov/STRS.

Knoxville resident Mike Cohen rents out his West Knoxville residence via Airbnb Saturday, Jan. 6, 2018. Cohen has opened his home to guests through the service for the past three years. Caitie McMekin/News Sentinel

Knoxville resident Mike Cohen rents out his West Knoxville residence via Airbnb. Cohen has opened his home to guests through the service for the past three years. In that time he has seen a steady stream of visitors from all over the country, plus England, Bulgaria, Syria, Canada and France. Caitie McMekin / News Sentinel

Knoxville resident Mike Cohen rents out his West Knoxville residence via Airbnb Saturday, Jan. 6, 2018. Cohen has opened his home to guests through the service for the past three years. Caitie McMekin/News Sentinel

Knoxville resident Mike Cohen rents out his West Knoxville residence via Airbnb Saturday, Jan. 6, 2018. Cohen has opened his home to guests through the service for the past three years. Caitie McMekin/News Sentinel

Knoxville resident Mike Cohen rents out his West Knoxville residence via Airbnb Saturday, Jan. 6, 2018. Cohen has opened his home to guests through the service for the past three years. Caitie McMekin/News Sentinel

Knoxville resident Mike Cohen rents out his West Knoxville residence via Airbnb Saturday, Jan. 6, 2018. Cohen has opened his home to guests through the service for the past three years. Caitie McMekin/News Sentinel

Knoxville resident Mike Cohen rents out his West Knoxville residence via Airbnb Saturday, Jan. 6, 2018. Cohen has opened his home to guests through the service for the past three years. Caitie McMekin/News Sentinel

Knoxville resident Mike Cohen rents out his West Knoxville residence via Airbnb Saturday, Jan. 6, 2018. Cohen has opened his home to guests through the service for the past three years. Caitie McMekin/News Sentinel

Knoxville resident Mike Cohen rents out his West Knoxville residence via Airbnb Saturday, Jan. 6, 2018. Cohen has opened his home to guests through the service for the past three years. Caitie McMekin/News Sentinel

Knoxville resident Mike Cohen rents out his West Knoxville residence via Airbnb Saturday, Jan. 6, 2018. Cohen has opened his home to guests through the service for the past three years. Caitie McMekin/News Sentinel

Knoxville resident Mike Cohen rents out his West Knoxville residence via Airbnb Saturday, Jan. 6, 2018. Cohen has opened his home to guests through the service for the past three years. Caitie McMekin/News Sentinel

Knoxville resident Mike Cohen rents out his West Knoxville residence via Airbnb Saturday, Jan. 6, 2018. Cohen has opened his home to guests through the service for the past three years. Caitie McMekin/News Sentinel